Photo courtesy of Tesco

Tesco’s sales fall 1.5% as inflation impacts consumer behaviour

Produce Business report

Spending might be rising in Tesco’s smaller stores, but it is down slightly in supermarkets and more significantly online in signs that inflation is taking its toll on weary UK consumers.

Overall, Tesco reported that sales overall fell by 1.5% in the first quarter of 2022 with the consumer pinch growing as they seek out bargains in order to pull together three square meals per day, and sometimes less.

While the UK’s biggest retailer is managing to stay ahead of its other top competitors on market share – Morrisons, Sainsbury’s and ASDA – shoppers are clearly cutting back both in terms of the number of purchases they are making and turning to store brands over private label. Much of the declines in spending were seen in staple items like beans and breads as they shift to own brands.

“Inflation is very real for everyone,” said Chief Executive Officer Ken Murphy said during a call with media members. “Where it is being passed on, our aim is to ensure it’s a little bit less and a little bit later than the rest of the market. The good news from a Tesco perspective is they’re still choosing to shop with Tesco because we’re so competitively priced.”

Murphy said despite the challenges, Tesco is still growing share in all of its markets thanks to its Aldi price-matching scheme on 600 products, its Clubcard pricing and its other sale items. In fact, Murphy points out that its retail sales are up by 10% since 2019. Despite that good news for Tesco, there is no sugar-coating the struggles facing British consumers who are still being hit with fallout from the pandemic and the war in Ukraine’s impact on global markets.

“We are seeing some early indications of changing behaviour as a result of the inflationary environment,” Murphy said. “It is therefore even more important that we work with our supplier partners to mitigate as much inflation as possible. Where it is being passed on, our aim is to ensure it is a little bit less and a little bit later than the rest of the market.”

According to reports from Bloomberg, shoppers at checkout are asking store colleagues to halt purchases that exceed certain amounts and are also reaching out to charitable organisations themselves to help fill their pantries and fridges.

As for Tesco’s own store colleagues and their own ability to earn a living wage, Murphy said, “we’re faring really well in the market, we’ve got good colleague availability. We’ve worked very hard to put a very competitive reward package together for colleagues. We’ve made a number of enhancements to our reward model, including increasing our colleague discount and also increasing minimum hour contracts to 16 hours. We’re doing an awful lot of work.”



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